1. High Performance EMS Financial Analysis
Jonathan D. Washko, BS-EMSA, NREMT-P
Director of Strategic Development – REMSA
President – Washko & Associates, LLC

2. Session Overview Defining and Calculating Schedule Costs
Defining Direct & Indirect Costs
Calculating the Types of Costs per Unit Hour
Calculating the Costs of Accurate Coverage

3. A Short Poem… A dollar spent (or wasted) here, Cannot be spent (or wasted) there.

4. HPEMS Financial Analysis
So why are we discussing this in an SSM class?
The changing of shift schedules and deployment plans have a direct economic impact on your system (either good or bad)
Mistakes made in not recognizing the financial impacts of these changes can have DIRE consequences (CLM / CEM Concept)
Hopefully we can show you the pitfalls and mistakes made by others in order to keep you from making a CEM!

5. Where men are men and the CEM’s & CLM’s run free
Schedule Costing
Where men are men and the CEM’s & CLM’s run free

6. Schedule Costing
Flexible schedules and work weeks are necessary in order to efficiently and effectively match supply with demand
Schedule costing allows you to determine how much each type of schedule costs and its impact on your budget
Helpful knowledge when designing schedules to meet demand to ensure the most efficient schedule possible
Two Types of Schedule Costing Models
Non-adjusting (traditional approach)
Adjusting (controversial approach)

7. This CANNOT be emphasized enough If these calculations get screwed up…
Schedule Costing
WARNING – WARNING – WARNING – WARNING
This CANNOT be emphasized enough
If these calculations get screwed up…
it’s gonna HURT!
BAD!!!

8. Defining Schedule Costs
Non-adjusting compensation model (Traditional approach)
Base hourly field wages remain the same no matter the length of the work week
Scheduled overtime costs / compensation rise and fall based on hours worked
Creates disparate annual compensation between providers based on length of scheduled work weeks
Creates an inappropriate inverse pay to workload relationship
This approach, if you are not careful, will bite you in the A$$, especially if you use quite a bit of scheduled overtime in your schedules

9. Non-adjusting Compensation Model Wage Conversions Made Simple
Employee working 40 hours a week base (5x8)
Paramedic Hourly Wage = $16.83
Using the “count up” method
(( ) x 52) x $16.83 = $35,000
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation

10. Non-adjusting Compensation Model Wage Conversions Made Simple
Employee working 45 hours a week base (5x9)
Paramedic Hourly Wage = $16.83
Using the “count up” method
(( ) x 52) x $16.83 = $41,570.10
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation

11. Non-adjusting Compensation Model Wage Conversions Made Simple
Employee working 48 hours a week base (4x12)
Paramedic Hourly Wage = $16.83
Using the “count up” method
(( ) x 52) x $16.83 = $45,508.32
((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation

12. Defining Schedule Costs
Adjusting Compensation Model (a.k.a. Straight Time Equivalent Model – Controversial approach)
Base hourly field wages adjust based on the length of the scheduled work week and shift length
Scheduled overtime costs / compensation are built into the employee’s annual compensation
Equalizes annual compensation between providers based on length of scheduled work weeks
Creates an appropriate pay to workload relationship (which is what makes this legal in the US)
Gives you maximum flexibility to produce Unit Hours and shift configurations that are affordable
This approach is what gave SSM a bad reputation as a means by which to save money for obvious reasons

13. Defining Schedule Costs
Adjusting Compensation Model (a.k.a. Straight Time Equivalent Model – Controversial approach)…continued…
Employee’s hourly wage adjusted based on the length of the shift worked in OT situations
PT / PRN wages also adjust based on the length of the shift worked
Causes your payroll folks to get a bit excited. Need to ensure payroll systems can handle various rates by provider if using this method
Is not an easy approach to sell (hence the “where men are men” statement), but can economically turn the tides for many systems (reduction or elimination of subsidy, improvement of profits, improved employee compensation, better equipment, etc.)

14. Adjusting Compensation Model Hourly Wage STE Conversions Made Simple
Employee working 40 hours a week base (5x8)
Paramedic Base Annual Wage = $35,000
Using the “count up” method
$35,000 ÷ (( ) x 52) = $16.83 / Hour
(( ) x 52) x $16.83 = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation

15. Adjusting Compensation Model Hourly Wage STE Conversions Made Simple
Employee working 45 hours a week base (5x9)
Paramedic Base Annual Wage = $35,000
Using the “count up” method
$35,000 ÷ (( ) x 52) = $14.17 / Hour
(( ) x 52) x $14.17 = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation

16. Adjusting Compensation Model Hourly Wage STE Conversions Made Simple
Employee working 48 hours a week base (4x12)
Paramedic Base Annual Wage = $35,000
Using the “count up” method
$35,000 ÷ (( ) x 52) = $12.94 / Hour
(( ) x 52) x $12.94 = $35,000
TC ÷ (ST + OT + ½ OT) x 52) = BW or ((ST + OT + ½ OT) x 52) x BW = TC
BW = Base Hourly Wage
ST = # of Straight Time Hours Worked / Week
OT = # of Overtime Hours Worked / Week
TC = Total Annual Compensation

17. Adjusting vs Non-adjusting Compensation Model Impact Comparison
Work Week
Non Adjust
Hourly
Annual
Adjusted
40 Hours
$16.83
$35,000.00
45 Hours
$41,570.10
$14.17
48 Hours
$45,508.32
$12.94
Can you see why this gave SSM such a bad reputation?

18. Defining Direct & Indirect Financial Models and the Cost per Unit Hour

19. Defining Direct & Indirect Costs
HPEMS Financial Overview
Most HPEMS systems cost budget and/or pro forma new business using the Direct and Indirect method
This approach provides a framework to easily build financial models that can be automatically adjusted by changing transports, unit hours and UHU projections
This enables the capabilities of “what if” scenario modeling for system changes based on changing assumptions and performance variables

20. Defining Direct & Indirect Costs
Direct Costs (Above the line)
Those costs involved directly in the production of unit hours
Typically variable in nature based on hours worked, miles driven, number of ambulances equipped, per call fees (like contracted dispatch or billing services), etc.
Strongly effected by Unit Hour Utilization and system efficiency
What is being priced and for what purpose will effect what expenses go into what category
Selling services vs budgeting for services

21. Defining Direct & Indirect Costs
Examples of Direct Costs
Field Wages
Field Payroll Taxes
Field Benefit Costs
Field Uniforms
Field Training
Ambulance Depreciation
Medical Equipment Depreciation
Medical Supplies
And so on…

22. Defining Direct & Indirect Costs
Indirect Costs (Below the line)
Overhead costs
Typically fixed costs that do not vary with the addition or subtraction of unit hours
Seldom effected by Unit Hour Utilization but may be effected by department efficiency
What is being priced and for what purpose will effect what expenses go into what category
Selling services vs budgeting for services

23. Defining Direct & Indirect Costs
Examples of Indirect Costs
Management Overhead / Allocations
Facilities Costs
Support Services Overhead
General Expenses
Legal Expenses
Utilities
Communications Costs
Fixed Asset Deprecation
And so on…

24. Defining Marginal & Fully Loaded Costs per Unit Hour
Marginal Costs Per Unit Hour
All the costs associated with producing one more unit hour
These costs are typically variable in nature
The calculation of this number enables organizations to assess the effects of taking on new business on a marginal basis (increasing transport volumes)
It also allows for the costing of system inefficiency and the cost of Lost Unit Hours
Assumes that overhead and support services do not expand or contract when business volumes change (+/-)
Calculated by taking total Direct variable costs divided by the total number of Unit Hours

25. Defining Marginal & Fully Loaded Costs per Unit Hour
Marginal Cost Per Unit Hour
Direct Expense Description
Costs
Paramedic & EMT Wages, Benefits, Taxes
$123,564
Fuel
$9,086
Vehicle Maintenance (no labor)
$6,432
Employee Uniforms
$250
Employee Training
$1,500
Disposable Medical Supplies
$3,254
Vehicle & Medical Equipment Depreciation
$800
Total Direct Expenses
$144,886
Total Unit Hours
2,587
Marginal Cost per Unit Hour
$56.00

26. Defining Marginal & Fully Loaded Costs per Unit Hour
All the costs associated with running an EMS agency on a per Unit Hour basis
The calculation of this number allows for benchmarking and comparisons against other services, bidders, system designs and budgetary variance reporting
Calculated by taking the total Direct variable and Indirect Fixed costs and dividing by the total number of Unit Hours

27. Defining Marginal & Fully Loaded Costs per Unit Hour
Fully Loaded Cost Per Unit Hour
Indirect Expense Description
Costs
Management Wages, Benefits & Taxes
$42,132
Support Services Wages, Benefits & Taxes
$25,154
Facility Costs
$2,500
G & A Costs, Legal Fees, Etc.
$1,100
Fixed Asset Depreciation
$500
Total Indirect Expenses
$71,386
Total Unit Hours
2,587
Indirect Cost per Unit Hour
$27.59
Marginal Cost per Unit Hour
$56.00
Fully Loaded Cost per Unit Hour
$83.59

28. Cost per Unit Hour Facts
Average cost / unit hour divided by UHU = cost per patient transport
Cost per patient transport divided by collection rate = average user fee at zero subsidy
The industry range of average cost per unit hour is $25 to $80 (1988)
Marginal cost/unit hour ranges from about 40% to 60% of average UH costs
Direct street labor costs (non-management) make up more than 50% of total average unit-hour costs
Unit Hour costs are powerfully affected by economies of scale
Unit-Hour cost is a poor predictor of clinical quality
Unit-Hour cost is a poor predictor of cost per patient transport
Unit-Hour cost is a poor predictor of subsidy requirements
Far less money is wasted in the production of unit hours than is wasted from squandered unit hours

29. Calculating the Costs of Accurate Coverage
A Real World Example….
The cost savings of an all ALS model versus tiered ALS & BLS model
The effect of using Adjusted versus Non-adjusted Schedule Costing

30. Costing Coverage
Client of Washko & Associates looking to convert from a tiered ALS / BLS model to an all ALS model
Wanted to assess the impact of this conversion to determine the savings (if any)
Also wanted to look at the impact of moving to a 48 hour work week from a 40 hour work week
Wanted to assess the impact of both the non-adjusted and the adjusted schedule costing approach and their impacts to the bottom line.

31. The Impacts of Shift Configuration Changes WITHOUT STE Adjustments and a Comparison of ALS versus Tiered Model Savings

32. The Impacts of Shift Configuration Changes WITH STE Adjustments and a Comparison of ALS versus Tiered Model Savings

33. Questions & Contact Information
REMSA
Phone: x140
Web:
Washko & Associates, LLC
High Performance EMS Consulting Services
Phone:
Web: